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Valuation Mod-4 Oil and Gas Field Services

Valuation Mod-4 Oil and Gas Field Services. Chris Jennis 2/1/2014. Agenda Module 4 Summary RNEA Forecasting Questions. Module 4 “How to formalize expectations of where the company is going” Forecasting Process Forecast revenues via forecasts of sales growth rates

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Valuation Mod-4 Oil and Gas Field Services

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  1. Valuation Mod-4Oil and Gas Field Services Chris Jennis 2/1/2014

  2. Agenda Module 4 Summary RNEA Forecasting Questions

  3. Module 4 • “How to formalize expectations of where the company is going” • Forecasting Process • Forecast revenues via forecasts of sales growth rates • Forecast EPAT via forecasts of EPM • Forecast NEA via forecasts of EATO • To consider • Conference calls may offer clues to growth rates • Adjust assumptions based on different company factors • Are you comparing to adequate competitors?

  4. Return on Enterprise Operations RNEA is the rate of return on capital invested in the enterprise activities EPM shows how much operating profit firm earns from each sales dollar EATO measures the productivity of the firm’s enterprise assets

  5. Analysis • RNEA= 11.92% • EPM= 12.23% • Earned 12.23 cents profit after enterprise expenses and taxes • Affected by enterprise expenses (wages, marketing, R&E) • Competition affects pricing and ability to control costs • 2010: 11.22% and 2011: 11.70% • EPM from sales very similar: Stable • EATO= 97.47% • For each dollar of enterprise assets employed, Schlumberger • generated $0.97 in sales • Median for publically traded firms over past decade is $1.40 • 2010: 84.12% and 2011: 93.20%

  6. Forecasting

  7. Sales Growth Over Time

  8. EPM from Sales over Time

  9. EATO over Time

  10. Multiyear Forecasts of Sales, EPAT and NEA Sales Growth Rate = 7% Enterprise profit margin = 12.23% Enterprise asset turnover= 0.974

  11. Questions?

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